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2014 (12) TMI 132 - AT - Income TaxConcealment of penalty u/s 271(1)(c) – Correct and true facts supplied for claim u/s 80JAA - Whether penalty is exigible where the issue is covered by the Hon’ble Supreme Court, only because, Hon’ble Supreme Court interprets the law – Held that:- The assessee is in the business of trading, processing and exporting of cut and polished diamonds had during the year engaged new regular employees, to whom the assessee had paid additional wages and in that view of fact, claimed the deduction u/s 80JJAA on those additional wages - The AO held that the deduction as claimed cannot be allowed, since there was no manufacture or production of any article by the undertaking - when the deduction was claimed, i.e. in AY 2005-06, Explanation 4 to section 10A w.e.f. 01.04.2004, was already in the statute book, which read as, "For the purposes of this section, "manufacture or produce" shall include the cutting and polishing of precious and semiprecious stones". The Finance Act, 2003 inserted Explanation 4 in section 10A of the Act w.e.f. 01.04.2004, the assessee was under bona fide belief that the definition can be extended for claiming deduction u/s 80JJAA of the Act as well, as the business of the assessee was cutting and polishing of rough diamonds - as canvassed by the assessee is well supported by Explanation 4, inserted in section 10A with effect from 01.04.2004 and also certain decisions, which are relied upon by the AR, has to be held to be bona fide - This is case where the claim made by the assessee u/s 80JJAA has only been rejected - the explanation given by the assessee with regard to its belief for the claim of the impugned deduction cannot be said to be mala fide – in COMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. [2010 (3) TMI 80 - SUPREME COURT] it has been held that the claim made by the assessee, which cannot be sustained in law, will not give rise to penalty to section 271(1)(c) of the Income Tax Act - penalty u/s 271(1)(c) is not exigible in respect of disallowance of claim of deduction, made by the assessee – thus, the order of the CIT(A) is set aside – Decided in favour of assessee.
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